Q: But virtually every commodities market is still trending down, much
                  as it has been for at least the last decade.
                  A: What's different is that on all these lows, almost across the board, the
                  commercial users are buying more than they have ever bought -- and they are
                  selling bonds. I'm no market guru, but I can tell you that's not a good sign for
                  the bull market in stocks. Our charts show commercials selling more bonds
                  than they have in 12 years -- at the same time the financial press is telling us
                  that rates are going to 5% or even 4 1/2 %.

                  Q: Not all of it. But so what?
                  A: I like that -- I can't tell you how many times the press chorus has gotten
                  loudest, just as the market's direction was about to change. Meanwhile,
                  what's fascinating here is that this short in bonds by commercials isn't just a
                  fairly large position, this is a huge position. As you can see on the chart, it is
                  about twice the size of their largest short position in the last 10 years. That's a
                  pretty strong statement about interest rates.

                  Q: The bull market in bonds is kaput?
                  A: I can't say that. The chart could be pointing to a change in the direction of
                  rates that lasts only four or five months. This could be a four-point correction
                  in bonds -- on their way to 3%, who knows? But the position of the
                  commercials says that they don't see rates going to 4 1/2 % right now. They
                  may go back to 7% first. I'm not calling an interest rate here.

                  Q: It sure sounds like you are.
                  A: What I'm telling you is that they are putting their money on interest rates
                  going up, for the foreseeable future, until they change that position. And I
                  wouldn't bet against them and hope the commercials are wrong.

                  Q: So you are short bond futures?
                  A: Yes. In fact, we shorted them up at 123.26, to be exact, which was about
                  a point off the high. Not only are the commercials extremely bearishly
                  positioned, but speculators have only been this bullish on one other occasion
                  -- and they were wrong then. So I would not be going long bonds today.
                  There's just too much evidence that you either stand aside or go short. This is
                  not going to end well for bonds. And until bonds trade back above their high,
                  say clear 125, this signal won't be negated.

                  Q: And you see similar disparities in the commercials' and speculators'
                  positions in other commodities?
                  A: Yes. Take the deutschemark, which has just experienced three or four little
                  legs down. We were looking for that move a month ago. It happened almost
                  on cue. There's been hardly any notice of it, but it amounts to several
                  thousand dollars a contract. We knew the odds were good for a good move
                  when the commercials reached a 10-year extreme in being short the
                  deutschemark about six weeks ago, while the speculators just loved it. Now
                  they are not buying it any more. In fact, they are selling it probably at a
                  bottom. The even bigger story is what's going on in the yen.

                  Q: The intervention, you mean?
                  A: Well, it's interesting that while many market watchers say the yen went up
                  because [U.S. Treasury Secretary Robert] Rubin stepped in and protected it,
                  our research says that's putting the cart before the horse. Long before Rubin
                  stepped in, the commercials -- who know more about the dynamics of the
                  yen than we're ever going to know -- had placed an extreme bet that the yen
                  had gotten low enough. In five days, that move was worth over $6,000 a
                  contract. Especially in currencies, these moves can happen very fast. We saw
                  the same sort of thing in silver, well before Warren Buffett's position was
                  announced. I suspect that we've probably heard the last of the really bad
                  news about the yen. The more people talk about how bad it can get, the more
                  likely it is not to get worse -- that's what the commercials are saying, not just
                  in the yen, but in about every hard asset.

                  Q: They are? 
                  A: Our gold chart is actually frightening to me because I like to watch the
                  stock market go up. But our data are telling us that the commercials are very
                  long gold and very short bonds. That tells me that they don't see these
                  deflationary trends lasting for the next 10 years. Money is flowing into
                  crevices that are saying interest rates might have gotten about as low as they
                  are going to get right now. They may get lower in the long term, but not right
                  now. And gold isn't going to $200 an ounce. In fact, it may not go much
                  lower than it is right now. We are long gold and profitable.

                  Q: What about the ag commodities?
                  A: The same sort of interesting picture is starting to form, whether you look at
                  sugar or coffee or soybeans or all the grains-commercial positions at or near
                  long extremes, while speculators can't stand the stuff. In coffee, for instance,
                  these current price lows are being bought by the commerical users. That
                  implies that the next trend in prices will be bullish. The same with sugar, where
                  the move has already started. We read the commercials' position as at a long
                  extreme when sugar was at seven cents a pound. It's already almost nine
                  cents, producing a gain of a couple thousand dollars per contract.

                  Q: And oil?
                  A: It's funny, but the one thing that fixes low prices is low prices. A natural
                  dynamic unfolds when a price gets too low. If I'm an OPEC country and the
                  price of oil gets too low, I'm going to do one of two things. I'm going to stop
                  selling it, or I'm going to have a meeting and convince all the other producers
                  to stop selling it, too, because I can't make a profit at current levels. So we
                  are going to stop getting so many barrels out of the ground. Then psychology
                  changes, people start fearing a shortage and, bang, prices go up. Right now,
                  commercials are buying the dips in oil, heating oil, natural gas and unleaded
                  gas -- they're not at bullish extremes like in some other hard assets, but the
                  speculators absolutely hate these markets. They've been beaten to death in
                  crude for the last six months as every $2 rally has been followed by a $2.50
                  drop. It's a classic bottoming. These markets are setting up for trends to the
                  upside, not the downside.

                  Q: Are you long?
                  A: We're long crude oil. Went long about a dollar ago. But most speculators
                  are short -- and probably will be until we get back up to the $15-$16 area.
                  I'm making the bet because I can't find a place, in any market, on any chart,
                  where speculator sentiment has been above 90%-95% in one direction where
                  betting against their position hasn't been the right thing to do.